Project Report Part 1: Assessment of External Environment for Nike a.

Firms Direct Competitors1

Company Name Nike Adidas Puma Reebok Sketchers Saucony K-Swiss Asics Keds L.A Gear Asics

Sales Revenues $150 billion2 $7.4 billion3 $1.5991 billion4 $3.4853 billion $221.8 million5 $133.2 million6 $121.6 million7 $111.1 million8 $696 million9 $580 million10 $465 million11

The Running Network: http://www.runningnetwork.com/news/stateofsport1July04.html 2 http://portland.bizjournals.com/portland/stories/2003/12/15/daily41.html 3 http://www.forbes.com/global/2002/0415/061_print.html 4 http://about.puma.com/news.jsp?year=04&id=19&lang=eng, accessed 17 Oct. 2004. 5 Skipressworld:http://www.skipressworld.com/us/en/daily_news/2003/11/ 6 Saucony, Inc: http://www.saucony.com/article_detail.aspx?articleID=1 7 Skipressworld:http://www.skipressworld.com/us/en/daily_news/2003/11/ 8 Asics: http://www.asicstiger.com/aboutus/pressroom/fall04/040721_asics_second_quart er.htm 9 http://www.forbes.com/2001/08/06/062.html, accessed 17 Oct. 2004. 10 Breeze Technology, Inc., http://www.businessplans.org/Breeze/breeze03.html, , accessed 18 Oct. 2004 11 Gardner Sydney, Customer Service, GBMI and Pony International, Personal interview, 19 Oct. 2004
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Reebok Channel Structure: Reebok Manufacturer Aurora, Ont. Warehouse

Specialty Sport Retailers

Online Retailers

Outlets

Independent Retailers

Customers

Market segments served Reebok Caters to two main types of consumers, the Performance Conscious Consumer and the Fashion Conscious Consumer. Their marketing scheme changes from time-to-time depending on the particular demand for the current campaign year. The main groups targeted are as follows: Performance Conscious Consumers (Athletes)1
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Runners Aerobic Dancers Tennis Players Basketball Players Step Exercisers Golfers

http://www.utdallas.edu/~esteffes/6

Fashion Conscious Consumers (Non-Athletes)1 Comfort and Style Conscious Walkers Children

Split of Functions between firm and Channel Members: Physical Movement of Goods Reebok uses many different currier systems depending on the size and relationship with a particular client. Some of these include UPS, Fed Ex, and Sometimes even Canada Post. The contact we spoke with from Athletes World receives their shipments through UPS.2 However not every retailer we spoke to gets their goods from Canada. Stores such as Champs, Athletes World, and Footlocker have buyers in the United States that choose their product line from a National Shoe Expos and each retail outlet receives shipment due to their demand. Training3 Management trains all staff Staff gets a manual on the merchandise and they get tested on the info that they learn. Staff gets trained on greeting, how to set up a shoe displays, how the shoes should look (appearance, how to tie laces, etc) Staff has to be knowledgeable about their shoes (especially top selling shoes)

Shipping4 Head office calls UPS and places an order of what shoes need to be delivered to what store. UPS picks up the shoes from a factory (warehouse) where Reebok and other running shoes are stored.
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http://www.utdallas.edu/~esteffes/6 Lisa Reebok Customer Service Rep (1-800-668-1800), Oct 19th 2004 3 April Athletes World, Pickering Town Center, Oct 16th 2004 4 April Athletes World, Pickering Town Center, Oct 16th 2004

UPS delivers shoes to Athletes world.

Warehousing Reebok handles all of its major warehousing tasks through their main office located in Aurora, Ontario.
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Selling Function to Retailers Reebok sends out catalogs to its retailers in which they can review and make potential orders.2 Retailing Functions The individual retailers handle these functions. Reebok may give some guidance when it comes to a new promotion; however its only a guide to the retailers. Advertising Functions Reebok hires Advertising firms to handle the creative side of advertising.3 Customer Service/Return Policy If you still have the receipt you should return the item to the retail shop where it was purchased. If there is no proof of purchase available you would call the Reebok Consumer Relations Team at 1-800-668-1800 so that they could arrange for the product to be returned for inspection.4 Financing Offered to Retailers Reebok sets up an account with its clients, which includes shipping and handling costs. The clients are then invoiced and billed.5 Consumer Promotions See the Last 12 months of Promotions

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April Athletes World, Pickering Town Center, Oct 16th 2004 Lisa Reebok Customer Service Rep (1-800-668-1800), Oct 19th 2004 3 April Athletes World, Pickering Town Center, Oct 16th 2004 4 http://www.reebok.com/ca_en/about/faq/default.htm#q23 5 Lisa Reebok Customer Service Rep (1-800-668-1800), Oct 19th 2004

In Store Merchandising Reebok sends out merchandisers to its retail stores to help out with its retail stores in house setup for their big promotions. At other times they send pictures of their set up and the staff will set it up accordingly.
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Reeboks Differences and Similarities to Nike Similarities Both Nike and Reebok use a lot of athletes to endorse their shoes. If customers had a problem with their shoes they can send them back to the manufacturer (if the retailers cannot help them). Both companys websites have general information on the companies. Nike and Reebok are always used as sponsors to support different sporting events. Reebok and Nike both compete for the same target market. Both companies spend large amounts of money investing it in marketing programs, technology research and development. Differences Reebok uses music artists that are currently on billboards top ten list to endorse their products as well as design shoes for them. Hip Hop artists such as Jay-Z, 50 Cents, Eve, Fabolous and Canadian rapper Choclair.
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Reebok has formed a partnership with the Indy Racing League. Reebok does not sell as many womens training shoes as Nike does.

April Athletes World, Pickering Town Center, Oct 16th 2004

Reeboks focuses on more diversification where as Nike focuses on product development.

Last 12 Months of Promotions Three new lines introduced and promoted by hip hop artists in both Music Videos and Commercials: Jay-Zs - S.CARTERS 50 Cents G 6, By G-Unit *NEW* Pharrell Williams Ice Cream Footwear JULY 2004 - Reebok and Jay-Z team up with Beyonce, Tyra Banks, Joy Bryant, Fergie, and Queen Latifah to design custom kicks for charity. All of these artists were involved with the fundraiser for charity where consumers could bid for shoes designed by their favorite celebrities with bids starting a $100 US. In addition to receiving the shoe, the winning bidder took home the celebrity's sketch of the designed shoe accompanied with an authentic autograph.1

http://www.reebok.com/useng/news/REEBOK+AND+JAY-Z+TEAM+UP+WITH+BEYONCE.htm

AUGUST 2004 Pharrell Williams launches a new line of clothing with Reebok called the Billionaires Boys Club2 SEPTEMBER 2004 Reebok launched nationwide Ad campaign to promote the famed Chivas Rayadas Del Guadalajara Soccer Team2

The Channel Structures for Adidas

2 2

http://www.reebok.com/useng/news/WHO+WANTS+TO+BE+A+BILLIONARE.htm http://www.reebok.com/useng/news/chivas.htm

Manufacturer (Adidas-Salomon AG)

Wholesaler (Adidas-Salomon Canada Limited)

Specialty Sporting Good Stores

Upscale Department Stores

Independent Chains

Customers

Market Segments Adidas targets two main types of consumers: Performance Conscious and Style Conscious consumers. Performance conscious consumers would be any kind of professional or recreational athletes, who are interested in speed or comfort. Style conscious consumers would be mostly young people, who pay
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www.adidas-salomon.ca

a lot of attention to fashion. This target market doesnt typically pay attention to the speed or comfort; these kids are more interested in trendy colors and shapes. Split of Functions Physical Movement of goods All shipments that come out of Adidas-Salomon are done through UPS trucking company. Ups ships the Adidas merchandise to all retail chains that carry the Adidas brand name.1 Warehousing Adidas-Salomon Canada Limited handles its warehousing tasks at head office located in Vaughan, Ontario.2 Selling function to retailers Adidas-Salomon gives out product catalogs to all of their retailers. The retailers will have the choice of which shoes they would want to purchase for their store.3 Retailing Functions All retailing functions are handled by only the retailers. Adidas-Salomon provides the retailers with the price range for Adidas merchandise.4 Advertising Functions An outside firm advertising firm handles all the advertising for AdidasSalomon.5 Training of Retailers Sales Representatives from Adidas-Salomon give retailers a brief training session to teach the retailers about Adidas merchandise. They dont actually teach the retailers how to sell the product, but explain the benefits and features that Adidas provides their customers.6 Customer Service

1 2 3 4 5 6

Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020) 2004 Canadian Business Directory Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020) Adidas-Salomon Canada Limited-Facts from the Officer of Finance, Mr. Bob Adam Adidas-Salomon Canada Limited-Facts from the Officer of Finance, Mr. Bob Adam Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)

Customers can visit the Adidas-Salomon website and email experts at the head office about any particular concerns, suggestions or opinions. AdidasSalomon customers are able to choose the brand on which he/she may have an interest in. There are three message categories for the customer to choose from which are, general information, sponsorship and promotional requests and warranty information.1 Customers are able exchange or get a full refund on the item purchased. Customers will receive the refund on the original method of payment. To be able to receive a full refund or exchange, the item has to be unworn and returned with the original receipt. It must be returned or exchange within 30 days from the original date of purchase.2 Any repairs that customer may have with an Adidas shoe, will be sent back to Adidas, where they will fixed the shoe.3 Financing offered to retailers Adidas-Salomon would not disclose any information on financing. A quick discussion was conducted with Adidas-Salomons Officer of Finance, Mr. Bob Adam. The only information disclosed was that an account is set up for all the retailers, which will include an invoice and billing for the shipping of the products.4 Consumer promotions In 2004, Adidas has many athletes endorsing their product such as: Laila Ali(Boxer) Kevin Garnett (Basketball Player) The Bryan Brothers (Tennis Player) Justine Henin-Hardenne (Tennis Player) Run-DMC (Rap Artist) These athletes and celebrities have appeared in varies advertisements throughout the year of 2004 to promote Adidas merchandising.5 In regards to any in-store sales, Adidas has not had any sales or promotion on Adidas merchandise. Retail stores such as Foot Locker have had discount on Adidas shoes and other major shoe brands.6 In-store Merchandising All in-store merchandising is handled by the retailers. Adidas-Salomon ask there retailers to position their product with the popular brands, such as Nike, Puma Reebok, etc. Adidas-Salomon wants the retailer to place the product in
1 2 3 4 5 6

http://www.adidas-salomon.ca/new_email_us.htm http://www.footlocker.ca/en/aboutus.aspx. Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020) Adidas-Salomon Canada Limited-Facts from the Officer of Finance, Mr. Bob Adam www.adidas.com Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)

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visible reach and view for the customers. If there are any special promotions on a new shoe from Adidas, they ask the retailers to position the shoe in the front of the store with banners and poster of the shoe throughout the store.1 Adidass similarities and differences to Nike Similarities Both companies concentrate on using innovation to improve the quality and performance of their shoes. Adidas is using Ultraride technologies with a first ever full-length foamless midsole, which provides consistent cushioning from first step to the last. Nike is using FIT technologies that manage temperature and moisture to help athletes train and compete in any conditions. Both companies develop various programs to help the environment. Adidas is concentrating on controlling and monitoring hazardous or restricted substances by eliminating PVC-containing materials from products, reducing VOCs (Volatile Organic Compounds) used to apply as a layer like paints, cements and glues. Nike is concentrating on developing a reuse-a-shoe program and using organic cotton to eliminate the content of synthetic fertilizers and pesticides. Adidas and Nike are both using famous athletes to endorse their products. Adidas is using such athletes as David Beckham and Ian Thorpe. Nike is using such athletes as Tiger Woods and Andre Agassi. Both Nike and Adidas get involved in sponsoring various events such as Olympic Games in Athens, Sixth Annual Walk and Bike and Nikes Sixth Annual Community Involvement Day.

Differences Adidas established a first ever partnership with a high-end fashion designer Stella McCarney, who will be launching the first true sport performance design collection for women. Unlike Nike, Adidas deriving almost all its sales from its Original Classic style line of shoes, where Nike is making all its money from its Athletic Ware. Adidas is attracting more fashion conscious youth not only with its shoes but also a wide variety of accessories such as bags, clothes, perfume, hats and so on.

Split of functions between firm and Channel members:

Foot Locker Head Office-Customer Service Representative via telephone(416-446-2020)

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Physical movement of goods Athletes World receives its merchandise once every two months from their Bata Head Office Distribution Center located in Vaughan. UPS trucking company delivers the merchandise to the actual store. In order to deliver the product to the retailers Head Office, Adidas usually ships the product to the Central Distribution Center location, where the various companies are able to pick the merchandise from. Training The store employees are trained according to the stores Training Manual The employees are tested on various levels of product knowledge by filling out a number of training modules The complete training lasts for about 4 weeks Shipping The Bata Head Offices Distribution Center places an order with UPS trucking company The UPS picks up the merchandise from the Central Warehouse location The UPS delivers the merchandise to the Athletes World stores Warehousing The central warehouse location used by Distribution department of Bata Head Office is in Bradford, Ontario Selling Functions to retailers The Bata Head Office conducts line reviews 4 times a year, where Adidas sales representative meets up with the Batas own team of buyers and negotiates the terms for sale, variety of styles and quantity of the new or existing Adidas shoes, which the Athletes World stores request for or already carry. Retailing Functions The Bata Head Office handles various retailing functions. After negotiating a deal with Adidas about the products requested, The Bata Head Office makes the decisions that have to do with in-store promotions and training. Last 12 months of promotions In the last 12 months, Adidas didnt organize any type of promotions, except for a couple of $10/$20 off sales, which were decided upon by the Bata group, after closing a purchase deal with Adidas. One of the reasons for advertising a sale would be the fact that Adidas classics style shoes tend to sell very well, but the Adidas brand does not sell well at all in comparison with other shoe brands in the store. The contacts were: Meaghan Wattie (The manager of the Athletes World store at Sherway Gardens)

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Brent Symonds (Vice President of Distribution at the Batas Head Office) Ted Varty (The Adidass Sales representative)

Channel Structures

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Wholesaler

Manufactu rer

Retailer

Specialty Sport Stores

Departmen t Stores

Independe nt Chains

Customer

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Pumas Market Segments Served

Currently, pumas market is worldwide. Their segments served are footwear, apparel, and accessories. However, within the footwear industry Pumas market segments in North America are focused on the youth. They will segment sporting goods stores, department stores (most stores that carry Diesel footwear seek out Puma to enhance their merchandise), and urban retailers. More specifically, Puma is segmenting their markets to alternative and urban individuals, the fashion/athletic market, and to a more controlled distribution.1

Split of Functions between firm and Channel Members: Physical Movement of Goods The companies that are under the regional accounts (buyer) have to pay for part of the shipping for Puma products. There are options to shipping. Shipping can be request 6 to 8 weeks in advanced. Footwear and is ordered based on season. Many of the stores that carry Puma, the footwear are transported from the states to head office and then to specialty stores such as champs, footlocker, athletes world, etc. Trucks, rail, ships, and air are all responsible for the transportation

of puma footwear. As well UPS, Speedy and Purolator deliver products to there retail chains in-between the wholesaler and the retailer. Trucks are the central transportation method of puma because they are the main transporters to ensure just in time delivery. It is necessary that stores order Puma in advance because there can be border delays from the U.S to Canada mainly because of the September 11th incident. Fees have to be paid especially when there are delays

Hal Plotkin,http://www.halplotkin.com/cnbcs049.htm>Nov 1 1999

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on the American side. Many companies that carry the brand have devices to keep track of inventory for Puma.

Financing offered to Retailers Regional discounts are offered to small businesses. Strategic discounts are offered to the bigger businesses like Footlocker, Athletes World, Sports Chek and etc. Ex. 100 units = 1% off, 200 units = 2% off.1

Training for employees For puma Footwear, many companies offer the four step program and trainee programs where employees will learn things such as customer service skills, product skills, as well as many will be rained for management skills. Many employees will learn the basic skills of selling and closing a sale.
2

Individuals will

have to have knowledge of the puma products as well as know the basic features and benefits of the product.3 Though Puma does not send a direct representative for the company, all the training programs are done internally either by employees from head office for the retailer or by managers from the retail store.4 Many employees of the retail chains will have the opportunity to meet with Head office staff and ask any questions or concerns they might have on any Puma

1 2

Spoke with representative from Puma Canada-October 17th,2004 Interview with Travis-District Manager of Champs Canada-October 15th, 2004 3 Interview with Melissa Lewis-Sales Associate Footlocker Canada-October 16th 4 Interview with Travis-District Manager at Champs Canada-October 15th

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products. Many members of head office for the retail store will come in and educate the staff about store procedures, as well as the right way to sell products to customers. (Told by district manager at Champs Canada, Travis)1

Training for Retailers and Functions Training for retailers is many mainly based on the ability of the retailers to be able to do personal selling as well as customer service functions. The retailers are not specifically trained but are able to handle management responsibilities in more than one department for a specific location that carries the Puma brand. Retailers should have basic knowledge of how to operate a computer because many functions such as monitor and holding inventory will have to be done.2 The retailers as told by Travis, should have a strong background in different areas to be able to retail to stores or individual franchises.3 The basic background involves tasks in: accounting, human resource issues, merchandising, etc. Lastly retailers will be trained how to provide assortments, and break bulking.4

Customer Service for End Users Some stores that carry Puma have a worry free guarantee within 14 days of purchase; it actually depends on the retail chain because other stores can be up to 30days. If you have a damaged or defective item you can return the item to the store nearest you, with original receipt and unworn product, or call the hotline of the store and tell them exactly whats wrong with the product. The store will happily refund the shoes for you as long as they havent been worn. Once you wear them the store automatically considers them to be yours. The
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Interview with Melissa Lewis-Sales Associate Footlocker Canada-October 16th http://www.google.ca/search? q=cache:Gq28qyn1nSIJ:about.puma.com/downloads/112.pdf+annual+report+from+puma&hl=en 3 Interview with Travis-District Manager at Champs Canada-October 15 4 about.puma.com/downloads/112.pdf

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store will refund your shoes if there is something wrong with them, give you back your money, then examine and test the defective product and thats only if its a manufactured defect.
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If there is something wrong wit the product the company

will gather all its defective products from Puma and then send them back to head office to see if they can be reimbursed from Puma. For exchanges its the same 14 or even up to 30 days and as longs as the shoes have not been worn, you can get a straight exchange for the same items that you purchased. If the customer has a valid complaint (such as defects) the company will exchange or refund the shoe with the exact pair. If they want to send there written complaints they will have to send a letter to the store they purchased their shoes from to the head office of the store.
2

Selling Function to Retailers Many Retailers buy products at wholesale prices from the manufacturers. The wholesales will buy Puma products in large quantities but will sell to the retailer in smaller amounts than what they bought. By doing this saves the retailer some money because they wont have to hold so much stock. The retailer buys what they feel are the best products to sell in their stores from the manufacturer. The wholesaler will help the retailer invest in any purchases that the retailer has made from them.3 Many retailers, if they pay direct cash for the products they choose from the wholesaler will have to pay lower prices on the preferred products, as well as if the retailer purchases the products in bulk form. There are also different methods for retailers to buy from wholesalers such as looking at the items that are made available from the wholesalers through catalogues.4

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Interview with Travis-District manager at Champs Canada, October 15th 2004 Interview with Melissa Lewis-Sales Associate Foot Locker Canada-October 16th, 2004 3 Spoke with Representative from Puma Canada Annette-October 14th, 2004 4 Spoke with Melissa Lewis-Sales Associate footlocker Canada-October 17th,2004

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Warehousing At this time there is not a warehouse for specifically Puma shoes.1 There are a few outlet stores for a variety of shoes that carry puma in the stores located in Mississauga as well as Calgary and Alberta. Puma operates flagship retail concept stores in London, Paris, New York, Tokyo, San Francisco, and many companies in Germany. There is though, the first Canadian Puma concept store, which is located on 2532 Yonge Street, Puma, offers a wide selection of their shoes.2 The company for the store orders all their products from the states and has them shipped here on their selected transportation method. There are about 30 warehouses around Europe and about 12 in the Middle East.3

Advertising Functions There are many advertising functions that Puma employs for it products. The company wants Pumas image for the dedication of sports to reach the entire market place and to be recognized for the leading shoes in sports. The company advertises shoes especially in the Olympic. The company advertises in magazines such as Vibe and the source. Puma also has commercials with athletes such boxer Oscar De La Hoya and Tennis star Serena Williams. Posters for the shoes are also posted in the retail stores.
4

In-store Merchandising

1 2

Interview with Travis-District Manger of Champs Canada-October 15th, 2004 http://www.newswire.ca/en/releases/archive/July2003/31/c7097.html 3 http://about.puma.com/downloads/112.pdf 4 http://www.google.ca/search? q=cache:Gq28qyn1nSIJ:about.puma.com/downloads/112.pdf+annual+report+from+puma&hl=en or http://about.puma.com/downloads/112.pdf and www.puma.com

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The retail chains are informed by head office that there will be retail merchandisers coming in to set up the specific area for Puma. 70% of the time, head office will contact the manager of the retail store and inform the staff how the visual layout should look by providing them with detailed pictures. They are also informed to place the shoes in order either based on price, and style.
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Customer Promotions There are promotions that run throughout the retail chains for puma throughout specified seasons from Head office. Such promotions that many retail chains run are buy one and get the second pair of shoes price. Save up to 30% off, employee appreciation where the employees have a chance to save up to 30% off and this is for employees only, and family and friends days where employees bring them and they receive 30% off if you have the 30% off card. This is not always available on Puma brand shoes, and many times they exclude puma from these promotions, because Puma shoes are expensive and there is a high demand for them.
2

Pumas Differences and Similarities to Nike Similarities Much like the classic Nike shoes, to a great extent Puma was and still is known as the classic shoe with its 1986 suede detailing. Even back then it was considered a classic and the look is remaining consistent in todays Puma footwear.

In attempts to grow awareness and endorse their athletic products, Puma brings in an NBA basketball player, Vince Carter to help position their

1 2

Spoke with Melissa Lewis-Sales Associate Footlocker Canada-October 17th,2004 Interview and spoke with Melissa Lewis-Sales Associate Footlocker Canada-October 16th and 17th

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brand. Nike is well known for continuously bringing all star endorsers to boost their company sales.
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Both companies are highly regarded and recognized, consequently resulting in targeting the same markets.2

Differences What sets Puma apart from Nike is that the company tries to concentrate on young people who are not just athletes, but people who have a sense of style. The image of Puma shoes appeals to alternative people and skaters. The look has an urbanized, retro style than the casual Nike shoes. Unlike Nikes consistency in recognition and sales revenue in the worldwide market, Puma has just recently regained their strength after falling off the marketplace for over a decade.

Puma sets itself apart from the competition by creating a strategic alliance with New Regency. This allows Puma rights to be an event sponsor to the Womens Tennis Association events, therefore helping Puma increase exposure to their company.
3

Nikes market segment diversification is much larger and extensive than Pumas, having the most comprehensive range of products.

Lefton, Terry. Puma sets real-athlete push via Carter TV Spot. Brandweek Vol.40, Issue 34 (Aug 13 1999): p.5
2

Geiger Andrew, Puma Claws Carter for Breach of Endorsement Contract, Awards $13.5 million in damages, injunction for breach, http://www.sportslawnews.com/archive/Articles%202000/CarterPuma.htm, accessed 17 Sept. 2004. 3 Tedeschi, Mark. The SGB interview. Sporting Goods Business Vol.34 Issue 8 (Jun 11, 2001) p.44 Leand, Judy, Pony Footwear is ready to Gallop. Sporting Goods Business Vol. 36 (Jul 2003): p.12

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Last 12 Months of Promotions

Consumer Promotions Within the last 12 months, promotions for Puma where mainly dealt with, within the store. Promotions would vary depending on the size, and popularity of the footwear. An example of the promotions would be in-store merchandising, which would include Puma shoes shelved inside coolers that are inside igloos. The effect was to demonstrate that the shoe was cool.
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More simply, retailers will

put together an outfit in order to merchandise or sell the shoe.2

Trade Promotions In regards to trade promotions between manufactures and retailers, Puma does very little to promote their products, nor do they need to. After interviewing several management employees from different sporting goods stores, each indicated in their own words that very little needed to be done to sell Puma products.3
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Spethmann Betsy, Delias Deal Strengthens Alloy, 1 Oct. 2003, http://promomagazine.com/deals/marketing_delias_deal_strengthens/, accessed 17 Sept. 2004.
Leand, Judy, Cool Cats. Sporting Goods Business Vol. 34 (Jun 11, 2001): p.44
2

Blanchard Ashley, Manager, Athletes World, Personal interview, 17 Oct. 2004 Walsh Russ, Regional Manager, Footlocker, Personal interview, 14 Oct. 2004 Blanchard Ashley, Manager, Athletes World, Personal interview, 17 Oct. 2004

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Their big fashion name and they sell fairly well. Pumas are trendy and really big right now.4 Richard Tyrell, Joggers Manager.

Puma Interviews Contact Name: Richard Tyrrell Position: Manager 1. What firm does your sales rep work for? A. Joggers 2. Who gives you your merchandising materials for this product? A. The shoes all come from head office. They do the ordering and we receive the products.
4

Tyrell Richard, Manager, Joggers, Personal interview, 15 Oct. 2004.

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A. No. 3. What kind of relationship do you have with your vendors? A. We really dont have a relationship with our vendors, compared to other vendors; the reps dont come in the store and talk to us. 4. What kind of retailer support does Puma offer? A. Through us, not much. 5. How far in advance are shoes ordered? A. They buy everything a year ahead of time. 6. What truck does it arrive on? A. It arrives in a Speedy truck. 7. Who provided sales training for you? A. No, theres no need. Basically everything is the same and we know how to sell them. 8. Is there any special education or training provided by the manufacturer in order to sell new products successfully? Contact Name: Russ Walsh Position: Regional Manager 1. What firm does your sales rep work for? Refund Policy: 30 days with a receipt. 12. What types of promotions have been set up within the last 12 months? A. Their big fashion name and they sell fairly well. Pumas are trendy and really big right now. We never have promotions. The product sells out at full price and the store carries enough to all be bought out. 11. What is the age range that comes in to buy Pumas? A. I would say, 15-23, but also younger to older. 10. How well does Puma sell in comparison to Nike? A. Because they are more of a causal shoe it varies. 9. Are their any incentives to sell this product (store/regional) A. No.

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A.

Footlocker (*Foot

A. It arrives in a Purolator truck. Who provided sales training for you?

Locker, Inc., Nikes largest retail channel member) 2. Who gives you your merchandising materials for this product? A. Head office does all the ordering. 3. What kind of relationship do you have with your vendors? A. Its a give and take relationship; we see them as partners and have an open partnership with them. They will take products back that do not perform well and if they have something new that is selling very well, they will offer us the product with quotas. 4. What kind of retailer support does Puma offer? A. N/A 5. How far in advance are shoes ordered? A. Head office is in control of all those functions, its the marketing managers job to do the ordering. 6. What truck does it arrive on? 11.

A.

There is a four step training program. Basically, everything is done internally, theres no puma person to actually train the employees one on one. We go through stages of training.

8.

Is there any special education or training provided by the manufacturer in order to sell new products successfully?

A.

If anything, the company will send us product knowledge information every once in a while.

Are their any incentives to sell this product (store/regional) No. 10. A. How well does Puma sell in comparison to Nike? I would say very well, if you were to compare them by category, head-to-head. About a 50 to 50 ratio.

What is the age range that comes in to buy Pumas? A. Anywhere from 14-35.

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12. What types of promotions have been set up within the last 12 months? A. We dont really have promotions for Puma Refund Policy: worry free guarantee Full Refund 60 days with receipt.

Contact Name: Ashley Blanchard Position: Manager A. They order a year in 1) What firm does your sales rep work for? A. Athletes World 2) Who gives you your merchandising materials for this product? A. Head office. 3) What kind of relationship do you have with your vendors? A. Basically, the buyers buy Pumas, and then its goes to the distribution centers. 4) What kind of retailer support does Puma offer? A. Theres no retailer support. 5) How far in advance are shoes ordered? 9) Are their any incentives to sell this product (store/regional) 7) Who provided sales training for you? A. No one does, usual training is done on higher end merchandise, not Puma. Puma is a more casual shoe, more urbanized. 8) Is there any special education or training provided by the manufacturer in order to sell new products successfully? A. No. 6) What truck does it arrive on? A. They come in a UPS truck. advance.

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A. No, we will display an outfit with the shoes to help sell them. 10)How well does Puma sell in comparison to Nike? A. I would say 20:80. 11)What is the age range that comes in to buy Pumas? A. Anywhere from the age of 16-40.

12)What types of promotions have been set up within the last 12 months? A. They dont really have promotions; if anything $10-20 off to get rid of any old inventory. Refund Policy: 90 days unworn. 90 day manufacture guarantee. Full refund with receipt, exchange without a receipt.

SOCIAL TRENDS: Now that the kids are moving out and debts are under control, the dominant generation is bursting from its cocoon. North Americans are beginning to leave their cozy homes and see more of life. The 10 million baby boomers and 7 million echo kids have been having a great impact on social trends concerning Nike. They are emerging from their cocoons and watching less television and emphasizing more on exercising and spending time at restaurants, movie theatres and engaging in other social activities. While the baby boomers were focused more on their family values, their concerns were targeting work, income, and spending quality time with members within the family. As their children have moved out, this large aging population has been interacting with others at social outings, moved into urbanized areas, and have become large money spenders. The echo kids are carrying on this new social trend of moving away from family oriented experiences to enjoying and exploring more of lifes common activities. Now, running shoes have become walking shoes, and the treadmill is being purchased to replace visits to the fitness center1. Nike can benefit from these new social trends. Since many individuals are going out more often, they obviously want to wear comfortable shoes and Nike can fulfill that need. This target market seems to be more focused on health and keeping fit. Walking, running, being part of sporting events is part of staying or becoming healthy. So Nike can begin to target not only the younger but older generations also. However, the younger population is more fascinated with fashion trends and going out so Nikes attention should be towards this group too. In an American Express survey of 1,300 U.S. consumers, 22% said that kids spend more on clothing than anything else. Most of these consumers said they developed their own personal style, but they also look to friends, magazines and newspapers, siblings and sports figures, MTV and musical artists and TV shows. Where it used
1

http://www.footwork.com/globe5.html

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to be parents who made the purchasing decisions and had the ultimate say in what was being bought, now its driven by what kids want, largely because of media influences. Kids are more aware of the rights they have, and we as parents are giving them more say than we used to.1 The newer generations are more independent these days when making purchase decisions. This affects Nike because they need to have more celebrity endorsements in order to maintain the percentage of this market segment. The new generation is manipulated by celebrities, their peers, and others who they look up to. Nike has had basketball players and tennis players to capture the attention of todays youth; so far, it has had a great impact on todays social trends. POLITICAL AND LEGAL TRENDS: There have been many issues concerning child labor law in North America and the Middle East. In North America, children under the age of 16 are not allowed to work in any industrial, commercial, or service sector. However, in the Middle East, there is a low standard of living with a high number of populations. Majority of the population is under the age of 18 and these children have no choice but to leave school and attend the working environment. For example, children 13 years and older are allowed to work in certain industries in Thailand. These children are exploited with low wages, excessive work hours, and hazardous working conditions. Western countries are determined to build trading barriers to any products that have been produced by child labor. However, developing countries will not end child labor; instead they will result in underground industry of child workers2. Nike has had a major problem with sweatshops and child labor. They were known to produce goods through using children in the Middle East. Although these families needed income, a higher standard of living, and a source of food and nutrition, Nike is affected by using this as an advantage. By having sweatshops, this has lowered their image in North America. Amnesty International recently blamed third world environmental and human rights abuses on "globalization" due to millions of products being produced, such as running shoes3. Although, politics in the Middle East allows child labor in some countries for specific industries, it may seem as though Nike is permitted to use this to their advantage. However, there will be trading barriers which discontinue the privilege of products produced in developing countries to be imported into developed countries. The political environment definitely affects Nike now because they need to have individuals of the appropriate age to manufacture goods, have new factories, pay their employees at an average rate, and build their image. If they continue to have workers in the East to manufacture their goods, then eventually people will want to fight to boycott the company and their products. ECONOMIC TRENDS: The Canadian economy has had its ups and downs. For example, it managed to create 43,000 (0.3%) net new jobs in September 2004. The labor force increased more than 0.1% in September and the unemployment rate is now
1

http://www.lfpress.ca/cgi-bin/niveau2.cgi?s=generic2&p=48105.html&a=1 http://www.magma.ca/~thaiott/childlabour.htm http://www.free-eco.org/articleDisplay.php?id=30

2 3

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at 7.1% compared to 7.2% a few months ago1. This may have an impact on Nike if they choose to have a factory in Canada. There would be more opportunities for Canadians and much more productivity. If Nike is able to hire a number of individuals, this can drastically reduce the unemployment rate. Statistics Canada shows a change in consumer price index and other major components. Higher prices for women's clothing and footwear (+1.7%) slowed the fall in the CPI in August of 2004. There was a percentage change between July and August which amounts to 0.9% for clothing and footwear2. Although there was a slowdown, Nike seems to still have an opportunity because women are increasing their purchase amounts for these specific goods. If Nike increases their prices though, there is a higher probability that consumers will not purchase their products as much as they used to. Canadas economy has just been given a boost and it would be difficult to maintain that if prices go up. Also, consumer spending is changing to 1.3% compared to 6.4% growth in the first quarter of 2004. Canadians personal disposable income rose 8% from 6.6%. Their spending behavior has slowed down compared to their disposable income. Real Consumer Spending and Household show that the disposable income in millions is $745,344 which is an 8% increase for the second quarter of 2004. Although, consumers are saving more and show an increase in their personal disposable income, their spending behavior is still going at a slower pace. As for consumer prices for clothing and footwear, the percentage change from 2003 to August 2004 were -0.7% to -1.0%3. Nike will have to look at this as a threat for now. This specific trend means that Nike might have to become more price sensitive for the next few months since Canada has recently recovered their downfall. Conversely, an increase in disposable income is an opportunity for Nike because consumers have more to spend. If Nike maintains a lower price for their shoes for the next 6 months, then eventually, they can increase their prices by 5-10%. COMPETITIVE TRENDS: Nikes primary competitors are Puma, Reebok, and Adidas. These brands have been around for decades and do not seem to be exiting the market. Once again, Nike is having trouble in the Middle East with their sales while competitors products are flowing smoothly. According to the Sporting Goods Manufacturers Association (SGMA), global sneaker sales are estimated to be worth over $15 billion annually. The five dominant categories are running shoes, basketball, cross-training, walking and casual/retro. In 2002, Nike held a 34.1% international market share while Adidas had a share of 16.5%4. Nike seems to be so involved in the NBA but the Middle East is not interested in it. In the Middle East, consumers perceive Nike as an American brand while Adidas is seen as a comfortable brand that fits in. The Middle East has a huge youth demographic, with a very high percentage of the population under 14 years old: 42 percent in Saudi Arabia and Oman, for example, compared to just 21 percent in the United States. Average ages in the Middle East are 19 years in Oman, 18 in Saudi Arabia and 25 in Kuwait. By comparison, the average age in the United States is 365. So, there is a large market but Nike is allowing Adidas, Reebok, and Puma to gain
1 2

http://homer.ca/business/economy/ http://www.statcan.ca/english/Subjects/Cpi/cpi-en.htm

3 4

http://strategis.ic.gc.ca/epic/internet/ineas-aes.nsf/vwapj/mei200409e.pdf/$FILE/mei200409e.pdf http://www.ameinfo.com/news/Detailed/42006.html 5 http://www.ameinfo.com/news/Detailed/42006.html

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more market share in those areas. Nike and Adidas are continuing to have their rival competition in the East while Reebok, Puma, and other companies are focused more on style, comfort, and brand strategies. Based on these facts, Nike should be focusing more on how to satisfy and gain market share in the East to be at the same level as their competition. In addition to Adidas current success with there image in the East and their newest technology, rumors say that they will buy Reebok1. If this occurs then Nike will be facing fierce competition because Adidas will be taking control in the current and future market and footwear industry. TECHNOLOGY TRENDS: Technology has become more advanced in todays world compared to a decade ago. It not only has improved electronics but it has also helped to improve our everyday tangible products, such as running shoes. Who would ever guess that technology can be used in athletic footwear? It is assumed that it can be used in machinery to produce products but chips in shoes are extremely innovative. Nike's Air technology, which used a gas-filled bag of air inserted in the sole of the shoe to cushion the impact of running, first appeared in 19792. Athletic shoes have become increasingly specialized since that time and prices have grown in accordance to new technology. LeBron James, Tracy McGrady, and Allen Iverson have the latest running shoes reserved for them which will be changing the footwear industry. Adidas is distributing these new pair of shoes at a price of $250 and it contains a computer microchip and operating system. Basically, this can analyze a runners step and begins making cushioning adjustments in the heel of the shoe. Adidas officials claim the shoe can take up to 20,000 readings and make 10,000 calculations per second3. Nike will definitely be behind Adidas new trend. Running shoes and other athletic pairs are purchased based on comfort, reliability, durability, etc. This new pair will be able to push Nike into second place of the entire market. The fact that these new shoes will adjust on its own, it will make it difficult for Nike to produce a new product to compete against it.

Bibliography Leand, Judy. Pony Footwear is ready to Gallop. Sporting Goods Business Vol.36 (Jul 2003): p.12
1

http://www.skipressworld.com/eu/en/daily_news/2004/08/adidassalomon_on_shopping_trip.html? cat=Finance 2 http://www.arch.mcgill.ca/prof/adams/arch350/fall1999/students/jmckim/history.htm 3 http://www.sportsbusinessnews.com/index.asp?story_id=36393

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Lefton, Terry. Puma sets real-athlete push via Carter TV Spot. Brandweek Vol.40, Issue 34 (Aug 13 1999): p.5 Tedeschi, Mark. The SGB interview. Sporting Goods Business Vol.31 Issue 11 (Jun 10, 1998) p.36 Leand, Judy. Cool Cats. Sporting Goods Business Vol.34 (Jun 11 2001): p.44 Blanchard Ashley, Manager, Athletes World, Personal interview, 17 Oct. 2004 Walsh Russ, Regional Manager, Footlocker, Personal interview, 14 Oct. 2004 Blanchard Ashley, Manager, Athletes World, Personal interview, 17 Oct. 2004 Tyrell Richard, Manager, Joggers, Personal interview, 15 Oct. 2004. Gardner Sydney, Customer Service, GBMI and Pony International, Personal interview, 19 Oct. 2004 http://about.puma.com/news.jsp?year=04&id=19&lang=eng, accessed 17 Oct. 2004. Running Strong Through 2nd Quarter, http://shoeexpo.com/archives.html, accessed 18 Oct. 2004 Wells Melanie, Sole Survivors, 8 Jun. 2001, http://www.forbes.com/2001/08/06/062.html, accessed accessed 18 Oct. 2004 17 Oct. 2004. Breeze Technology, Inc., http://www.businessplans.org/Breeze/breeze03.html, ,

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